The Election's Home Stretch
There is now less than 30 days before the Presidential election. And as we predicted some time ago, the rhetoric has ratcheted up significantly. So much so, that many analysts are indicating that this is the most acrimonious race in history. No one should be surprised at all regarding these conclusions. And with the focus on ancillary issues, there is less focus upon the economy. For one, we are surprised about how little is being said about the economy–from housing issues to tax plans. Not to say that the candidates have not laid out plans, but they don’t seem to be the focal point of the election rhetoric.
Is this lack of focus affecting the markets? For one, the markets have been a bit more stable these past few months, as compared to the period from late 2015 through early 2016. There have been volatile days and weeks, but overall, the stock market has traded in a pretty tight range during this time. Are the markets looking past the election and will they just meander around until election day passes?
Not that all the markets have been stable. For one, oil prices have recovered well over 50% from their lows earlier in the year. It appears that some oil producing nations are serious about cutting production, and these agreements are fueling the increases, if you pardon the pun. Oil prices have risen before, only to come back down, and it remains to be seen where prices will go from here. Higher oil prices could be perceived by the Federal Reserve Board as an inflationary risk. Thus, the specter of higher oil prices could be one factor persuading the Fed to act on higher interest rates at their December meeting — again assuming that they will not act in November right before the election.
The Weekly Market Update
Rates rose last week, as the markets continued to anticipate a December rate increase by the Federal Reserve Board. For the week ending October 13, Freddie Mac announced that 30-year fixed rates rose to 3.47% from 3.42% the week before. The average for 15-year loans also increased to 2.76%, and the average for five-year adjustables rose slightly to 2.82%. A year ago, 30-year fixed rates were at 3.82%, approximately one-third of one percent higher than today's levels.
Attributed to Sean Becketti, Chief Economist, Freddie Mac -- "This week the 10-year Treasury yield continued its climb, as an increasing number of financial market participants foresee a December rate hike after a series of positive economic data releases. The rate on 30-year fixed loans moved up 5 basis points to 3.47 percent in this week's survey, the first increase in one month. Even though we've seen economic activity pick up, consumer price inflation and implied inflation expectations remain below the Federal Reserve's 2 percent target."
Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.